A Tax Cut That Affects Both Aggregate Demand and Potential

question 63

Multiple Choice

A tax cut that affects both aggregate demand and potential output is predicted to _____ the long-run equilibrium level of output, while inflation _____.

• A)increase; increases
• B)increase; decreases
• C)increase; may increase, decrease, or remain unchanged
• D)decrease; decrease

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Definitions:

Probability

A measure of the likelihood of occurrence of a particular event or outcome, often expressed as a number between 0 and 1.

NORM.DIST

A function in various statistical software that returns the normal distribution for a specified mean and standard deviation.

Standard Error

Standard error is a statistical measure that estimates the accuracy with which a sample distribution represents a population by using standard deviation.

Population Standard Deviation

Population Standard Deviation is a measure of the dispersion or spread of all the values in a given population, indicating how much the individual values in the population differ from the population mean.